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05-09-2018

Product code: Accounts-AW702

 

Outline for Project

           

In this project you will act as an equity fund manager for the Florida State Pension Fund.  You are to manage $10,000,000.  You may not have more than 15% of the fund in short-term riskless assets.  You are not allowed to short-sell, use leverage, or derivative trades on this fund.  Your compensation package is based upon your risk adjusted performance.  Also, since you are managing an investment fund churning your portfolio (making excessive trades) is strictly forbidden.  Once your strategy and fund “prospectus” is finalized you will not be doing any other trading.

           

There are two phases of this project.  This first phase is where you will decide your investment strategy and undergo portfolio selection.  Here you will look through the list of companies provided and decide upon the type of fund, diversification level and asset allocation.  You will write a prospectus for your fund with details as to stock selection.   This should be written in a memo format as if this proposal will be considered by the Chief Investment Officer (CIO) of the Florida State Pension Fund (FSPF).You must be “fully-invested” in the first phase. 

           

In the second phase you will track your portfolio and analyze your results.  You will compare the actual two month return to the anticipated performance of your fund.  Justification as well as analysis on the performance should be conducted.  This again should be written in a memo format as if it is going to the CIO of the FSPF.

           

For this project you may use the ticker symbols listed in the folder for the second project.  These companies were randomly selected from the Wilshire 2000 as well as a few “Blue Chip” companies.  Additionally, excel files containing both monthly and daily price data with rolling raw firm betas are provided from the CRSP data center.  You may (are encouraged to use this data), if you elect to use other companies you must obtain the data used for your analysis on your own. 

The grading is outlined below.  Listed are items which must be included in the analysis submitted for a grade.  However, the list is not exhaustive and other items may be beneficial to your report.  In order to receive extra credit on the assignment you must go above and beyond the minimum listed below.

Phase One:

Listing of the “objectives” of the fund: 

  • This should include the investment philosophy of the fund (growth, value, large cap etc)
  • The benchmark the fund should be compared
  • Monthly return objectives
  • The targeted risk level
  • To whom the fund should be marketed
  • Diversification level selected and explanation of why.

 

The equities selected for the fund and their weights

The Betas used to calculate the Beta of the portfolio should be outlined for each of the equities (in other words how did you arrive at the numbers used)

The total risk of the fund

The Sharpe Ratio

Phase Two:

The two month return of the fund

The return of the selected benchmark

The risk adjusted return of the portfolio

Explanations of why the funds returns were better, worse or as expected compared to its benchmark.

Realized portfolio beta

Analysis of key events (news) which affected portfolio returns

 

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Product code: Accounts-AW702

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